Michael P. Schaefer v. Archdiocese of St. Paul and Minneapolis, Roman Catholic Diocese of Orange Revocable Trust

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2014).

STATE OF MINNESOTA
IN COURT OF APPEALS
A15-1700

Michael P. Schaefer, et al.,
Respondents,

vs.

Archdiocese of St. Paul and Minneapolis, et al.,
Defendants,

Roman Catholic Diocese of Orange Revocable Trust, et al.,
Appellants.

Filed October 17, 2016
Reversed
Peterson, Judge

Dakota County District Court
File No. 19HA-CV-15-1490

John D. Thompson, Oberman Thompson, LLC, Minneapolis, Minnesota (for respondents)

Paul J. Zech, Scott D. Blake, Felhaber Larson, Minneapolis, Minnesota (for appellants)

Considered and decided by Peterson, Presiding Judge; Hooten, Judge; and

Muehlberg, Judge*.

*
Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by
appointment pursuant to Minn. Const. art. VI, § 10.
 UNPUBLISHED OPINION

PETERSON, Judge

Appellants challenge the district court’s denial of their motion to dismiss

respondents’ claims against them for lack of personal jurisdiction. We reverse.

FACTS

Respondent Michael P. Schaefer is a resident of Minnesota and the president and

sole member of respondent MPSCHAEFER, LLC (the LLC), a Minnesota limited liability

company. Schaefer was formerly the executive director of defendant Catholic Finance

Corporation (CFC), a Minnesota nonprofit corporation, which provides financial services

to defendant Archdiocese of St. Paul and Minneapolis, a Minnesota nonprofit corporation.

Appellants are the Roman Catholic Diocese of Orange, a California nonprofit

corporation located in California; the Roman Catholic Diocese of Orange Revocable Trust

(ORT), a trust located in California that was established for the benefit of Roman Catholic

parishes, schools, and charitable organizations located in California; and Mater Dei High

School, a Roman Catholic high school located in California. All of the appellants are

exclusively located in California.

Schaefer is a financial advisor who specializes in organizational and financial

management of Catholic organizations. Schaefer was the executive director of CFC when

it provided financial services to Catholic organizations nationwide; as an employee of CFC,

Schaefer provided advice to appellants.

In 2011, after CFC elected to serve only the Archdiocese of St. Paul and

Minneapolis, Schaefer opened his own consulting practice, the LLC, and began providing

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consulting services to appellant Diocese of Orange and its related entities. Schaefer

regularly attended meetings of the Diocese of Orange’s Budget and Financial Planning

Committee. Later in 2011, the Diocese of Orange contracted with Schaefer to provide

services to a number of Catholic schools in California. In 2013, the LLC began providing

services to a number of unincorporated parishes in California; ORT entered into contracts

with the LLC on behalf of these parishes. In each of the contracts, the LLC and ORT

agreed that Minnesota law would govern. Approximately 80% of the work performed by

the LLC for the California entities from 2011 through 2013 was performed in Minnesota.

In an affidavit, the Reverend Steve Sallot, Vicar General for the Diocese of Orange,

stated that all of the contracts with the LLC were negotiated and signed in California;

meetings of the Diocese of Orange’s Budget and Financial Planning Committee, which

Schaefer regularly attended, were always held in Orange County, California; and “[n]o

employee or agent of the California [appellants] ever traveled to Minnesota in connection

with the financial consulting services provided by [the LLC].”

Schaefer and Phil Ries, the director of finance of the Diocese of Orange, regularly

attended the Diocesan Fiscal Managers Conference. According to Schaeffer, he and Ries

spent some time talking about the needs of the Diocese and its affiliates at each of those

conferences, which provided direction on active engagements and often led to additional

work. In 2011, the conference was held in Minneapolis. This is the only time that any of

appellants’ employees visited Minnesota.

Ries planned to retire in 2013, and Schaefer was asked to work on an interim basis

as the Diocese of Orange’s director of finance, with a possible later expansion of duties.

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The LLC and the Diocese of Orange entered into a written contract in November 2013,

agreeing that Schaefer would act as interim director of finance. The contract provided that

Minnesota law would govern. Schaefer actually began working as interim director in

October 2013.

In December 2013, an employee of the Diocese of Orange made a complaint about

Schaefer. While investigating the complaint, the Diocese of Orange contacted defendants

Archdiocese of St. Paul and Minneapolis and CFC, which reported that Schaefer had

engaged in sexual misconduct while employed there, although Schaefer contends that

neither this allegation nor the allegation by the employee in California was true. Based on

their investigation, appellants terminated all contracts and agreements that its employees,

affiliates, or associated entities had with the LLC, rescinded all personal references and

recommendations that had been provided for Schaefer, and refused to provide further

personal references and recommendations.

Respondents sued appellants, alleging breach of contract, tortious interference with

contract, tortious interference with prospective economic relations, unjust enrichment, and

quantum meruit. Respondents also sued the defendants, alleging breach of contract,

tortious interference with contract, tortious interference with prospective economic

relations, and defamation. Defendants interposed an answer, and appellants moved under

Minn. R. Civ. P. 12.02(b) to dismiss the complaint against them for lack of personal

jurisdiction. After a hearing, the district court denied the motion to dismiss, and this appeal

followed.

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 DECISION

A denial of a motion to dismiss for lack of personal jurisdiction is “immediately

appealable.” Janssen v. Best & Flanagan, LLP, 704 N.W.2d 759, 763 (Minn. 2005).

Whether jurisdiction exists is a question of law, which we review de novo. Volkman v.

Hanover Invs., Inc., 843 N.W.2d 789, 794 (Minn. App. 2014). The plaintiff has the burden

of demonstrating that a court has personal jurisdiction over a defendant, and that burden

must be met by more than general averments or statements. Id. At the pretrial stage, the

plaintiff’s allegations and supporting evidence are accepted as true by the reviewing court.

Juelich v. Yamazaki Mazak Optonics Corp., 682 N.W.2d 565, 570 (Minn. 2004). In a close

case, any doubt about whether a court has jurisdiction should be resolved in favor of

retaining jurisdiction. Hardrives, Inc. v. City of LaCrosse, 307 Minn. 290, 296, 240

N.W.2d 814, 818 (1976).

In Int’l Shoe Co. v. Washington, the United States Supreme Court considered

whether a state court could exercise jurisdiction over a nonresident corporation under the

due-process requirements of the Fourteenth Amendment. 326 U.S. 310, 66 S. Ct. 154

(1945). The Supreme Court concluded that a state may exercise personal jurisdiction over

a nonresident who had “certain minimum contacts with [the state] such that the

maintenance of the suit does not offend traditional notions of fair play and substantial

justice.” Id. at 316, 66 S. Ct. at 158 (quotation omitted).

Minnesota’s long-arm statute provides that Minnesota courts may exercise personal

jurisdiction over any foreign corporation or any nonresident individual in the same manner

as over a domestic corporation or resident individual

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 if, in person or through an agent, the foreign corporation or
nonresident individual:
(1) owns, uses, or possesses any real or personal
property situated in this state; or
(2) transacts any business within the state; or
(3) commits any act in Minnesota causing injury or
property damage; or
(4) commits any act outside Minnesota causing injury
or property damage in Minnesota, subject to the following
exceptions when no jurisdiction shall be found:
(i) Minnesota has no substantial interest in
providing a forum; or
ii) the burden placed on the defendant by being
brought under the state’s jurisdiction would violate fairness
and substantial justice.

Minn. Stat. § 543.19, subd. 1 (2014). Minnesota courts may exercise jurisdiction under the

long-arm statute if “exercise of such jurisdiction does not violate the due process

requirement that the nonresident defendant have certain ‘minimum contacts’ with”

Minnesota, or, stated otherwise, if federal constitutional requirements of due process are

met. Domtar, Inc. v. Niagara Fire Ins. Co., 533 N.W.2d 25, 29 (Minn. 1995).

A court may exercise “general” jurisdiction over a defendant who has had

“continuous and systematic contacts with the state.” Griffis v. Luban, 646 N.W.2d 527,

532 (Minn. 2002) (quotation omitted). “Where the nonresident defendant’s contacts with

the forum state are not sufficient for general jurisdiction, the defendant may nonetheless

be subject to ‘specific’ jurisdiction--that is, jurisdiction over a claim that allegedly arose

out of the defendant’s contacts with the forum.” Id. In this case, respondents allege that

their claims arose out of their contractual relationships with appellants, and we must

consider whether appellants’ contacts with Minnesota are sufficient to establish specific

jurisdiction over appellants.

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 In judging minimum contacts for purposes of assessing
the validity of specific jurisdiction, a court focuses on the
relationship among the defendant, the forum, and the litigation.
For the minimum contacts requirement to be satisfied, the
defendant must have purposefully availed herself of the
privilege of conducting activities within the jurisdiction. The
defendant’s conduct and connections with the forum state must
be such that the defendant should reasonably anticipate being
haled into court there. . . .[S]pecific jurisdiction may be found
where the nonresident defendant has purposefully directed his
activities at residents of the forum and the litigation results
from alleged injuries that arise out of or relate to those
activities.

Id. (quotations and citations omitted).

But, “[f]or a [s]tate to exercise jurisdiction consistent with due process, the

defendant’s suit-related conduct must create a substantial connection with the forum

[s]tate.” Walden v. Fiore, 134 S. Ct. 1115, 1121 (2014). Physical presence in the forum

state is not required, but “the relationship among the defendant, the forum, and the

litigation” must arise out of contacts that the defendant creates with the forum state, not the

defendant’s contacts with persons who reside in the forum state. Id. at 1121-22 (quotations

omitted).

A plaintiff’s contract with an out-of-state defendant cannot automatically establish

sufficient minimum contacts in the plaintiff’s home forum. Burger King Corp. v.

Rudzewicz, 471 U.S. 462, 478, 105 S. Ct. 2174, 2185 (1985). Instead, the parties’ “prior

negotiations and contemplated future consequences, along with the terms of the contract

and the parties’ actual course of dealing . . . must be evaluated in determining whether the

defendant purposefully established minimum contacts within the forum.” Id. at 479, 105

S. Ct. at 2185.

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 Prior negotiations and contemplated future consequences

Respondents’ complaint and Schaefer’s supporting affidavit include only a general

averment that, “[i]n early 2013, [the LLC] entered into written contracts for [the LLC] to

provide professional services to a number of parishes (unincorporated associations) within

the Diocese of Orange.” Respondents do not dispute that all of the contracts were

negotiated and signed in California and that no employee or agent of appellants ever

traveled to Minnesota in connection with the financial consulting services provided by the

LLC. Respondents’ only allegation that an employee or agent of appellants traveled to

Minnesota was that Phil Ries attended a Diocesan Fiscal Managers Conference in

Minneapolis in 2011. Schaefer stated in his affidavit that he and Ries regularly attended

fiscal-managers conferences, and, at each conference, they spent some time talking about

the needs of the Diocese. But Schaefer did not state that anything discussed at the 2011

conference was in any way connected to the contracts that the LLC entered into in 2013.

Thus, there is no evidence that the relationship among appellants, Minnesota, and

respondents’ lawsuit arose out of Ries’s visit to Minnesota in 2011 or that appellants had

any other contact with Minnesota before entering into the contracts in 2013.

Schaefer also alleged that the parties contemplated a continuing relationship in

which respondents would do additional work for affiliates of the Diocese and Schaefer

would become the permanent director of finance and administration for the Diocese. The

continuing relationship would lead to additional work, Schaefer explained, because

“[e]mployment as a consultant in the Catholic Church, more so than other organizations,

is highly dependent on personal references.” The entities identified as affiliates of the

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Diocese were all located in California, but personal references would be significant in all

50 states because Schaefer’s consulting practice was national in scope.

Terms of the contracts

The record does not include copies of the contracts, but respondents alleged that

each of the contracts provided that Minnesota law governs the contract and, under the

contracts, respondents would provide professional services to appellants.

Parties’ actual course of dealing

Respondents’ complaint and Schaefer’s supporting affidavit alleged only one

contact between appellants and Minnesota during the parties’ actual course of dealing

under the contracts. Respondents alleged in their complaint that, after a Diocese employee

made a complaint about Schaefer, “the Diocese of Orange contacted the Archdiocese of St.

Paul and Minneapolis and/or CFC to investigate Schaefer.” Schaefer made a similar

allegation in his affidavit. Neither the complaint nor the affidavit indicated how this

contact occurred, but both alleged that appellants terminated their contracts with

respondents because of information communicated during the contact. In addition to this

one contact, Schaefer stated in his affidavit that 80% of the work performed by the LLC

for appellants from 2011 through 2013 was performed in Minnesota.

Accepting all of respondents’ allegations and supporting evidence as true, we

conclude that respondents did not meet their burden of demonstrating that appellants

purposefully established minimum contacts with Minnesota. Although appellants entered

into contracts with a Minnesota limited liability company, the contracts were negotiated

and signed in California. There is no allegation that appellants initiated the negotiations or

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sought out respondents in Minnesota, and there is no allegation that any representative of

an appellant entered Minnesota in connection with the contracts.

Phil Ries, an employee of one of the appellants, entered Minnesota to attend a

conference more than one year before any of the contracts were formed. During the

conference, Ries spoke with Schaefer, but there is no allegation that Ries came to

Minnesota for the purpose of speaking with Schaefer or that their conversation was related

to the contracts in any way. The relationship among appellants, Minnesota, and this

litigation did not arise out of Ries’s attendance at the conference.

Nor did the parties’ actual course of dealing demonstrate that appellants had

minimum contacts with Minnesota. Under the contracts, respondents provided

professional services to appellants. Although Schaefer stated in his affidavit that 80% of

the work performed by the LLC for appellants from 2011 through 2013 was performed in

Minnesota, appellants received the services in California. The actual course of the parties’

dealings was that, while in California, appellants contracted to purchase professional

services from a Minnesota limited liability company.

This court concluded in Walker Mgmt., Inc. v. FHC Enters., Inc., that, for purposes

of establishing personal jurisdiction, “[t]here is a distinct difference between purchasers of

goods and services from Minnesota residents as opposed to sellers of goods and services

to Minnesota residents.” 446 N.W.2d 913, 915 (Minn. App. 1989), review denied (Minn.

Dec. 15, 1989). One who sells services or goods to a Minnesota resident may reasonably

expect to be “haled into court” in Minnesota to defend an action by a Minnesota resident,

but a nonresident who purchases from a Minnesota resident services that are worked on in

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Minnesota, but provided outside Minnesota, does not share that expectation. See id. at 915-

16; see also Dent-Air, Inc. v. Beech Mountain Air Serv., Inc., 332 N.W.2d 904, 907 (Minn.

1983) (stating that “[i]n reviewing the nature and quality of the contacts, we are attempting

to ascertain whether the nonresidents purposefully availed themselves of the benefits and

protections of Minnesota law”) (quotation omitted)).

In Walker, FHC, an Illinois corporation, contracted with Walker Management, a

Minnesota corporation, for consulting, marketing, and management services for a housing

project in Illinois. 446 N.W.2d at 913. FHC had no offices, staff, or property in Minnesota.

Id. at 914. It was not registered in Minnesota, filed no tax returns, and sent no

representatives to Minnesota. Id.

Although “the marketing services were implemented in Illinois,” Walker

Management was based in Minnesota, did not have a marketing office in Illinois, and

performed “a large portion of the work they completed for FHC . . . in Minnesota.” Id.

“There were numerous telephone conversations between representatives of FHC and

Walker, in addition to correspondence, payments, and other documents which were sent

by FHC from Illinois to Walker in Minnesota.” Id. And, during the one and one-half years

while the contract was in effect, “two representatives from FHC traveled to Minnesota to

view Walker’s operations, meet with Walker personnel, and tour Walker properties.” Id.

at 913-14. Also, some of the work was done by other Minnesota vendors who contracted

with Walker Management. Id. at 914.

After FHC filed a breach-of-contract action in Illinois, Walker filed a breach-of-

contract action in Minnesota. Id. FHC’s motion to dismiss Walker’s complaint for lack of

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personal jurisdiction was denied, and this court reversed. Id. at 913. This court concluded

that FHC’s contacts with Minnesota were “so slight that FHC could not reasonably have

expected to have been ‘haled into court’ in Minnesota to defend an action brought by the

seller of services, particularly when all of Walker’s services were to be performed in the

Chicago area.” Id. at 915.

This court’s reasoning in Walker is consistent with the Supreme Court’s analysis in

Walden, which rejected the use of the plaintiff’s contact with the forum state “to satisfy the

defendant-focused minimum contacts inquiry.” 134 S. Ct. at 1122 (quotation marks

omitted). The Supreme Court explained in Walden that minimum-contacts analysis looks

at the defendant’s contacts with the forum state, not contacts with a state resident. Id. In

this case, respondents performed work for appellants in Minnesota, but the work was

implemented in California. With respect to this work, appellants had no contact with

Minnesota, except for their contacts with Schaefer. Under Walden and Walker, Schaefer’s

contacts with Minnesota do not satisfy the defendant-focused minimum-contacts inquiry.

There are two significant differences between the facts in Walker and the facts in

this case. Unlike the contracts in this case, which provide that they are governed by

Minnesota law, the contract in Walker provided that it was to be governed by Illinois law,

446 N.W.2d at 913-14. And, unlike the decision to terminate the contracts in this case,

which was based, in part, on information that appellants received during a single contact

with Minnesota, the reason why the contract in Walker was terminated is not stated in the

opinion. Neither of these differences leads to a different result in this case than in Walker.

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 The supreme court has determined that a contract clause calling for application of

Minnesota law is not sufficient to confer personal jurisdiction. Dent-Air, Inc., 332 N.W.2d

at 908. As the supreme court explained in Dent-Air, if the parties had “wanted to ensure

the use of Minnesota’s courts in the event of breach of contract, they could have

contractually consented to personal jurisdiction in Minnesota.” Id. And the mere fact that

information that appellants received during a single contact with Minnesota contributed to

appellants’ decision to terminate the contracts is not sufficient to confer personal

jurisdiction. Appellants could not reasonably anticipate being haled into court in

Minnesota because they made a single contact with Schaefer’s previous employer in

Minnesota while investigating a complaint made about Schaefer by an employee in

California.

In addition to their contract claims, respondents alleged that appellants committed

intentional torts. In Griffis, the Minnesota Supreme Court explained that the United States

Supreme Court has “approved a test for determining personal jurisdiction over nonresident

defendants who allegedly committed an intentional tort outside the forum.” Griffis, 646

N.W.2d at 532. Citing Calder v. Jones, 465 U.S. 783, 787 & n.6, 104 S. Ct. 1482, 1485 &

n.6 (1984), the Minnesota Supreme Court explained that “[r]ather than focusing only on

the defendant’s conduct within or contacts with the forum, the so-called ‘effects test’

approved in Calder allowed long-arm jurisdiction to be based on the effects within the

forum of tortious conduct outside the forum.” Griffis, 646 N.W.2d at 532. The supreme

court explained further that the Calder test

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 requires the plaintiff to show that: (1) the defendant committed
an intentional tort; (2) the plaintiff felt the brunt of the harm
caused by that tort in the forum such that the forum state was
the focal point of the plaintiff’s injury; and (3) the defendant
expressly aimed the tortious conduct at the forum such that the
forum state was the focal point of the tortious activity. . . . [T]o
satisfy the third prong, the plaintiff must show that the
defendant knew that the plaintiff would suffer the brunt of the
harm caused by the tortious conduct in the forum, and point to
specific activity indicating the defendant expressly aimed its
tortious conduct at the forum.

Id. at 534 (quotation and citation omitted). Foreseeability of injury in the forum is not

enough, however, and something more than the defendant’s knowledge that the plaintiff is

a resident of the forum and will feel the effects of the tortious conduct there is necessary to

satisfy the effects test. Id. at 534-35.

Respondents alleged tortious interference with contract and prospective economic

relations, and, accepting these allegations as true, respondents demonstrated that appellants

committed an intentional tort. But respondents’ allegations do not demonstrate that

Minnesota was the focal point of respondents’ injuries or that appellants expressly aimed

the tortious conduct at Minnesota. Respondents lost contracts with appellants, all of which

were exclusively located in California. Respondents also lost personal references that

could lead to work in the future. But Schaefer alleged that his consulting practice was

national in scope and that the loss of references interfered with his business in all 50 states.

Presumably, appellants’ refusal to provide references could cause injury in Minnesota, but

nothing indicates that appellants aimed their tortious conduct at Minnesota.

Reversed.

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